Sunday, September 27, 2009

Buying a house in Argentina. Is it really worth the risk?


A woman stands on the corner of Reconquista Street, waiting to cross Cordoba Avenue. It’s a busy afternoon in downtown Buenos Aires. A man next to her punches her squarely in the face. She falls down. A second man pulls out a gun. He tells the crowds to stay back while the first man grabs the lady’s handbag from her arm. Two motorbikes pull up alongside. The two men jump on and they speed off.

Buying a house in Argentina can be the biggest investment you ever make, or the day you lose it all. Why? An archaic system in which property transactions are made in cash. On three, you give me the deeds and I give you the money; one, two... three.

The purchase is in two parts. In the first, el boleto (a 20% deposit to start the process), the buyer chooses the location and hands over the cash when the seller arrives. The second stage, when the remaining 80% of the price is transferred, the seller chooses where. In both stages, someone arrives, or leaves, with a bag load of cash. The risk is worth it for most. Unless you’re like the unlucky lady with a handbag stashed full of 100 dollar bills, punched and robbed in the street.

Why the risk?

Stemming from an absolute lack of trust in the banks (post financial meltdown in 2001 when many Argentines lost all the savings they’d deposited); the deal is now done with as little banking involvement possible. Deposit and withdrawal charges totalling 1.2%, astronomical costs for electronic transactions, and charges of up to $US12 per month just to have a current account, means most of the population keep their savings in security boxes within the banks. Money out of the system; or black money as Argentines call it. The big day means transferring black money from one safety box to another. A theoretically safe process, assuming nobody knows you’re in the street with the cash.

Who knows?

At least three parties. The buyer, the seller, and the bank housing the security box. A word from one of them to a band of thieves, like those on the motorbikes who robbed the lady on Cordoba Avenue, and somebody’s cash is not completing the journey. More often than not bank workers are accused of involvement in the robberies, increasing the mistrust in the banking system. Even those who hire a security firm to escort them as they transport the cash are not safe; underpaid security men know you’ve hired them for a reason.

What to do?

Keep the location of the transaction secret until the last moment. Remain vigilant when taking the money from the bank. Perhaps start moving the money in small quantities before transaction day, (though keeping US$100,000 under your mattress is not safe either). But most importantly, trust no one, keep on your toes, and remember; the biggest investment of your life can in a split second, become the day you lose it all.

3 comments:

  1. very interesting story! Northern Rock is not so bad after all!

    ReplyDelete
  2. Why don't you offer this e.g. to a major daily?

    Excellent story and very topical to show why it is important that the public retain at least some confidence in banks!

    All the best!

    Kari

    ReplyDelete
  3. Smart post and so good blog
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    ReplyDelete